On Tuesday 17 November 2020, the NSW Treasurer, The Hon. Dominic Perrottet MP, released the NSW State Budget, including some key plans and support for reform of our tax system. A powerful voice for tax reform, the Treasurer will also be a panellist at The Tax Summit: Project Reform next week.
In his Budget speech, the Treasurer said, “For state governments, the reform with the greatest potential to unlock prosperity is tax. Report after report has recommended action, including our own Review of Federal Financial Relations.”
“Today we turn theory into the first firm step, seeking feedback on a proposal to transform our property tax system.”
The Tax Institute congratulates the Minister for his leadership in reforming State taxes. The Tax Institute welcomes the opportunity to be a part of the consultation process in the plan to overhaul stamp duty particularly given its alignment to our current major endeavour, The Tax Summit: Project Reform.
The Minister seeks to achieve a system whereby a purchaser could elect to pay tax either upfront on the acquisition of a property (and continue to pay land tax annually where applicable) or alternatively pay an annual property tax based on the unimproved land value of the property (this would also absorb any applicable land tax liability).
It is proposed that once a property is subject to the annual property tax, it will remain subject to that tax for all subsequent owners. Eligible first home buyers, however, would now become eligible to an upfront grant of up to $25,000 to either apply toward the tax or other home refurbishments.
“This model would give NSW a realistic pathway to achieving the most important state economic reform of the last half century,” the Treasurer said.
“If you want to move, change jobs, or switch careers, upsize or downsize to match your family size, stamp duty can be the spanner in the works. It is holding our economy back at a time we need to be going full throttle. That’s why we believe that reform is the best way forward.”
Further change to payroll tax
The Treasurer also announced further, welcome change around payroll tax. When the COVID-19 pandemic hit, the Government’s plan to raise the payroll tax threshold to $1 million by July 2021 were brought forward to 2020. This Budget took those changes further.
In his speech, the Treasurer said, “Just three years ago, NSW was not competitive on payroll tax. Both our rate and our threshold were at the middle of the pack. Well we want NSW to be the most attractive state to build a business and create jobs.”
The Tax Institute warmly welcomes the reform to the NSW Payroll Tax regime, permanently increasing the threshold from $1 million to $1.2 million and assisting NSW business in this present environment by reducing the rate from 5.45% to 4.85% for a 2-year period, with effect from 1 July 2020.
General Manager – Tax Policy and Advocacy at The Tax Institute, Scott Treatt, applauded the Treasurer’s much-needed leadership in the area of tax reform.
“Real tax reform is not achieved by tinkering at the edges,” Scott said. “It takes a longer-term vision to achieve real tax reform, and this is a perspective The Hon. Dominic Perrottet MP has brought to the table.”
The push for change at The Tax Summit: Project Reform
The Tax Institute is well advanced in working with the community and the tax profession in its continued endeavours toward tax reform. The Tax Summit: Project Reform, is an ambitious endeavour bringing together tax practitioners, academics, regulators and policy makers in an effort to define what real tax reform should look like.
The Virtual Summit event, where we will bring together all the insights and ideas so far raised in the extensive program of lead in Focus sessions and Keynotes, takes place next week, on 24–25 November 2020.
The Treasurer will be joining us at the Virtual Summit, speaking in a panel session called Running the Gauntlet… How to effect change? He’ll be joined by other notable changemakers, including Rt Hon Sir Bill English, former Prime Minister of New Zealand, The Hon. Andrew Leigh MP, Shadow Assistant Minister for Treasury and Charities, Dr Julianne Jaques, CTA, Victorian Bar and Viva Hammer, Brandeis University.
This session, held on Day 2, will draw on the panellists’ wealth of experience to outline how reform can be achieved and implemented. What are the key ingredients to making change occur and stick? You’ll find out here.
This event is your chance to share your perspective on what our priorities should be while reforming our tax system. We hope to see you there.